Rita A. Crundwell (born January 10, 1953) was the appointed comptroller and treasurer of Dixon, Illinois, from 1983 to 2012, and the admitted operator of what is believed to be the largest municipal fraud in American history. She was fired in April 2012 after it was revealed that she had embezzled $53.7 million from the city over 22 years to support her championship American Quarter Horse breeding operation. [1][2][3][4] She pled guilty to her crimes and was sentenced to nearly 20 years in prison.[1]

Crundwell's Quarter Horse operation, RC Quarter Horses, was one of the best-known Quarter Horse breeders in the country; her horses won 52 world championships and she was named the leading owner by the American Quarter Horse Association for eight consecutive years prior to her arrest.[1][5][6]

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Born Rita Humphrey, the daughter of Ray and Caroline Humphrey,[7] she grew up on her family's farm near Dixon[6] and in 1970, a year before graduating from Dixon High School,[6] began working at the Dixon City Hall as a work-study student.[1] She began showing quarter horses in 1978. She married engineering tech Jerry L. Crundwell in 1974, while working as a secretary for Dixon's mayor; they divorced in 1986.[7]

In 1983 Crundwell was appointed the treasurer/comptroller for Dixon, and she worked in this capacity for almost three decades.[1][6][8] She acquired a sterling reputation; for instance in 2011 one of the city commissioners praised Crundwell for her stewardship of city finances, saying "she looks after every tax dollar as if it were her own."[9]

On December 8, 1990; Crundwell opened a secret bank account named RSCDA (Reserve Sewer Capital Development Account), making it appear to be a city account. She was the only signatory. She would have money deposited into another account called the Capital Development Fund, create false state invoices, and then write checks from the fund payable to "Treasurer," which she would deposit into the RSCDA account. According to federal investigators, this relatively uncomplicated scheme continued for 22 years.[10][1]

On average, Crundwell stole $5 million per year from the city. In 1991, she stole $181,000, while in 2008 alone she managed to embezzle $5.8 million.[1] She not only used the money to finance her Quarter Horse operation, but also to support a lifestyle well beyond her $80,000 city salary. Among other things, she bought several cars, a second house and a motorhome.[11]

Crundwell covered up her embezzlement by claiming the city's frequent budget shortfalls were due to the state being late in paying the city its share of tax revenue.[12] She forced city departments to make drastic service cuts in order to keep the budget within reason. As a result, employees went two years or more without raises and the police department couldn't get new radios.[13] The most visible effect, however, was on street maintenance. The city was forced to lay off three of its nine street repair workers and cut the rate of maintenance. In the decade prior to Crundwell's arrest, only 65 blocks of road were repaired or replaced.[9]

For most of Crundwell's tenure, residents trusted her despite the city's perilous economic conditions. They assumed that either she inherited wealth and/or that her award-winning quarter horse breeding business was profitable in its own right. By the late 2000s, with the financial crisis and economic recession, as city maintenance and equipment suffered, there were some suspicions that she was stealing money, which went as high as Mayor James G. Burke. However, the city's outside auditors, CliftonLarsonAllen and local accountant Sam Card, dismissed his concerns, as they presumed that Crundwell was honest and signed off on Crundwell's financial statements annually without concern. For small American cities similar to Dixon, lack of sufficient outside audits was a recurring problem, as third-party auditors at best could only give limited attention. For most of her tenure as comptroller, Crundwell had nearly complete control over the city's accounts, while few if any city employees had access to the city financial statements.[1]

In the fall of 2011, while Crundwell was on an extended vacation, city clerk Kathe Swanson, who served as acting comptroller in Crundwell's absence, discovered the account and many checks written on it.[6] Swanson suspected that this was not a legitimate city account, and brought the information to Burke, who contacted the Federal Bureau of Investigation (FBI). The fraud continued for six more months, as Burke and Swanson (whose payroll was controlled by Crundwell) had to remain silent while the FBI built up their case.[10]

Crundwell arrived for work on April 17, 2012 to find FBI agents waiting for her. She was arrested later that day and indicted by a federal grand jury for embezzling $30 million from the city during the previous six years.[5][14][10] She was charged with one count of wire fraud and released on $4,500 bail the next day.[15][16] On May 2, 2012, a superseding indictment charged her with embezzling $53 million over the prior 22 years.

On November 14, 2012, Crundwell pled guilty before Judge Philip Reinhard to a single count of wire fraud.[17] As part of the deal, she also admitted to money laundering by using the stolen money to finance her Quarter Horse operation. She was required to forfeit over $53.7 million in cash, assets and possessions, equivalent to the amount she stole, which will be used to make full restitution to the city.[12] She reportedly told FBI agents that some of the money was spent on her horses and their upkeep. Prosecutors sought the forfeit of her horse farm and 300 horses, in addition to her three homes and a luxury motor vehicle.[5] Prosecutors later discovered that Crundwell's crimes had begun as early as 1988, when she siphoned off $25,000 from the Dixon Sister City program over two years.[2] Had she not pleaded guilty, she would have faced additional charges of bank fraud, wire fraud and money laundering that could have sent her to prison for the rest of her life.

The following month, Dixon's new finance director said that the city had seen an almost $3 million rebound since Crundwell's arrest, but that the operating budget was still off by $16.6 million.[18] It was also reported that Dixon lost $30 million in operating funds over the prior decade.[18] The city sued its outside auditors, as well as the city's banker, Fifth Third Bank, for ignoring numerous red flags in Crundwell's actions. In September 2013, the auditors and Fifth Third agreed to pay the city $40 million in a settlement, while the auction of Crundwell's assets brought in another $10 million.[19]

At sentencing on February 14, 2013; prosecutors sought the maximum sentence of 20 years in federal prison. Their case was bolstered by testimony from Moore and city staffers that Crundwell used dramatic analogies to force spending cuts in order to cover up her theft, which left Dixon unable to provide the most basic services. The defense asked for 13 years, saying that Crundwell had cooperated with authorities in recovering the money. Ultimately, Reinhard sentenced Crundwell to 19 years and 7 months in prison,close to what prosecutors had sought. Reinhard noted that she put her passion for raising horses ahead of the needs of the city residents whom had entrusted her with their fund, and that a significant prison term was required to restore public confidence. Reinhard was so disgusted with Crundwell's behavior that he revoked her bail and remanded her to custody rather than allow her to self-report to prison. [1][2][9][20] Crundwell appealed the sentence, claiming that it was too draconian. However, the Seventh Circuit Court of Appeals upheld the sentence in November.[9]

On September 20, 2012, Crundwell was also indicted on 60 state counts of theft, alleging that she stole $11.2 million from April 2010 right until the day before she was arrested on federal charges. Burke and Lee County State's Attorney Henry Dixon said the state charges, which carried a minimum of six years per count, were a backup in case Crundwell was acquitted on the federal charges.[21] However, the state charges were dropped in April 2013. Dixon's successor as state's attorney, Anna Sacco-Miller, said that it did not make sense to spend taxpayer money on prosecuting Crundwell since there were virtually no assets left for the state to seize (though Dixon had initially said he had no plans to seize assets from her). Sacco-Miller also said that Illinois sentencing guidelines require state and federal sentences to run concurrently, Crundwell would likely serve out any sentence imposed at the state level while she was still in federal prison.[22][23]